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What Hath Got Rot?

Dec. 04, 2020 12:24 PM ET
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  • Market prices have come untethered.
  • Color me yellow.

I recall there was abbreviated discussion of the US stock market in our family Zoom encounter last week, with somebody expressing enthusiasm that I was conspicuously lacking. I just finished reading a good summary of the problem: US hiring slows sharply to 245,000 jobs as virus intensifies

In this regard, I'm profoundly ambivalent about the public policy options we face. As the pandemic crests, we will need to provide massive support to working-class folks so they don't starve or shoot themselves. How will this be financed? We already have a mountain of debt, and there are signs that investor interest is shifting abroad for this reason.

Another concern is that the incoming administration is attempting to woo working-class folks with promises of support for unionization in the face of corporate greed. It may be time for that pendulum to reverse its course, but that won't help the bottom line of US companies. Suppose the starting wage becomes $15/hr; what do you do for your lower-level supervisors who were getting $15? You'd have to boost them to $30. The effect would undoubtedly "trickle up" through the organization, depressing corporate profits to the point where they have to raise prices and HEY PRESTO! it's a rerun of wage-price inflation leading to economic stagnation. Not good for stock prices.

We appear to have a market untethered to realistic concerns about the immediate future. The most recent examples I can recall were 1999 (before the Tech Wreck) and 1987 (before Black Monday). If I were a young fellow awash with cash that I didn't need instead of an old codger living on savings, I might bite.

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